Tuesday 22 March 2011
This week the turnaround (including a bit of Friday too) has been pretty strong, maybe all those worries were not so bad after all? Actually, nothing has really changed. There is no progress at the Fukushima although the irrational fears about some sort of major fallout incident have receded. In the meantime the US/UK have started a new war in Libya which has in some ways created more instability by preventing Qaddafi from ending the rebel revolt. Nothing has change in Bahrain either except the lack of international focus on the country. Indeed, in Yemen and Syria the Arab revolutionary fervour is burning ever stronger.
So in many ways it is strange that the markets have bounced so strongly, is it the famous Dead Cat Bounce or is it they were too oversold? As usual, these things can only be worked out in hindsight but it will be interesting to see.
Also interesting in the crash of last week is the phenomenon of linkage across most asset classes. Gold and Silver fell 3% and the FTSE fell 5%, oil fell nearly 10%. Only the US dollar and treasuries/gilts do well in the new market of sell-offs. Perhaps when Armageddon arrives Gold and Silver won't quite be the havens of goldbugs dreams